FRANCHISING IN THE RESTAURANT INDUSTRY
Franchising in the restaurant industry is pervasive; it is the quintessential franchise. Although purchasing a well-known brand under the right circumstances can give you a leg-up in the perennial competition battle among all food service retailers, it can also in other cases severely disadvantage you, to the extent you have to pay excessive franchise fees, which you cannot pass on to ultimate consumers in the food service industry. Further, in the case of many well-known and established restaurant franchise systems, individual franchisees usually do not possess the market power to obtain monetary and non-financial concessions during the negotiations for the purchase of a restaurant franchise. Accordingly, it is very important for the potential franchisee to negotiate up-front very explicit and equitable exit terms, should that course become necessary down the line.
Unlike service stations or automobile franchises, a restaurant franchise is not regulated by any federal or state industry-specific legislation. This means that the normal franchisee facing unreasonable or bad faith restaurant franchisor conduct will need to rely on either the uncertain and unhelpful common law, or in some cases, state-specific general franchise legislation that might cover normal restaurant franchises.
Restaurant franchisees face many industry specific challenges, including encroachment on territory and product. As a restaurant franchisee, you must be aware of the real risk that exists that your franchisor will approve of the opening of other competing restaurants in your market. Further, restaurant franchisors historically have ‘cut out’ the franchisee in the distribution chain by selling unique products directly to supermarkets. In buying from the franchisor at lower prices, the supermarkets are then able to undercut franchisees’ prices to ultimate customers for the same products.
Restaurant franchisees also regularly face the ‘remodeling challenge’ as erected interminably by franchisors. Almost every restaurant franchise agreement allows franchisors to dictate the type, cost and timing of all remodeling and renovation requirements. In essence, restaurant franchise agreements bestow complete discretion to the franchisor or supplier regarding the cost, timing and extent of improvements to the dealer or franchisee’s property. Many times, although these improvements increase to some extent the bottom line of the franchisor, they undercut the profitability of the franchisees that were forced to make these renovations. The key here is that franchisors and suppliers frequently develop highly expensive remodeling requirements without adequately taking into account the dollars-and-cents impact of the renovations on individual franchisees.
GOLDSTEIN LAW’S SUCCESS IN ADVOCATING FOR RESTAURANT FRANCHISEES AND DEALERS
Jeff Goldstein and the lawyers at the Goldstein law firm have over thirty years of distribution and franchise law experience representing only franchisees and dealers in franchise litigation and work-outs. Jeff Goldstein and the other franchise attorneys at the Goldstein Law Firm know the unique pit-falls that can befall restaurant franchisees in particular, and have for three decades obtained cutting-edge settlements for franchisees and dealers in the food service industry, both in and out of court.
WHAT TO DO IF YOU ARE CONTEMPLATING PURCHASHING A RESTAURANT FRANCHISE
If you are considering purchasing a restaurant franchise, you should seek out an experience franchise law firm that has faced major encroachment, termination, and remodeling disputes in the food service industry. With an experienced franchise lawyer, like Jeff Goldstein, by your side, you can trust that your personal and business interests will be represented and protected. With thirty years of franchise law experience, Jeff Goldstein and Goldstein Law can help draft your franchise or dealer agreement and resolve any disputes that may arise.
To effectively safeguard your restaurant franchise, you should contact franchisee attorney Jeff Goldstein at the Goldstein Law Firm at 202-293-3947. Don’t let your restaurant franchisor or supplier use its market power to coerce you into an unfair agreement, or unfairly threaten your existing restaurant franchise.